4.6 Benefits of a circular economy

This briefing aims to assess how circular economy measures contribute to reducing pressures on the climate, pollution and biodiversity by decreasing the need to extract natural resources. The assessment also addresses the circular economy’s potential to make Europe’s economy more resilient, secure jobs and strengthen Europe’s strategic autonomy with respect to resources.

Key policies

The International Resource Panel concludes that roughly half of global greenhouse gas (GHG) emissions, 40% of health-related impacts due to particulate matter, and more than 90% of biodiversity loss and water stress come about as a result of resource extraction and processing at the global level. The circular economy action plan 2020 states that ‘scaling up the circular economy (…) will make a decisive contribution to achieving climate neutrality by 2050 and decoupling economic growth from resource use, while ensuring the long-term competitiveness of the EU and leaving no one behind.'

Past trends (10-15 years)

Trends/developments show a mixed picture

Environmental impacts linked to the extraction, processing and use of material resources (i.e. biomass, metals, non-metallic minerals, fossil resources) fluctuated but remained at approximately the same level in 2022 as in 2010 in the EU-27 (Figure 1), indicating that circular economy actions have not yet been effective in bending this trend. This is also confirmed by the very modest increase in the EU’s circular material use rate (CMUR) (briefing 4.4 Circular use of materials). Evidence of the actual environmental effects of circular economy actions implemented in the past 10-15 years is not currently available.

Employment in circular economy sectors and their share in the economy (measured as gross value added) increased by 14-15% in the period 2010-2023. The EU’s dependency on material imports — slightly above 20% — has barely changed. Reliance on imports is especially high for many metals, including those critical for the EU economy and the green transition. Overall, trends are mixed, depending on the material.

Outlook (10-15 years)

Trends/developments expected to show a mixed picture

The EU aims to accelerate circular economy measures' implementation, reflected by the ambition to double its CMUR by 2030 and recently-adopted strategies such as the Clean Industrial Deal.

A combination of ambitious strategies could lead to a situation where the ambition to double the circular material use rate in the EU is met. This would involve fossil fuel phase-out in line with climate policy, large increases in recycling levels and an ambitious reduction in material use across the EU’s economy. Altogether, this could halve the GHG emissions related to material extraction and processing. and reduce health impacts related to particulate matter by around one third.

In such a scenario, the highest share of reduction would come from reducing material use and, to a lesser extent, from recycling. However, such high reductions in material use would require very ambitious circular economy actions, such as lowering the demand for new products or even shifts in less resource-intensive diets, as indicated in several studies. Such wide-reaching measures are not currently planned.

Potential benefits for reducing biodiversity loss are more difficult to assess and would mainly come about as a result of reducing the use of bio-based materials, including food, and sourcing them more sustainably.

A move towards a more circular economy is expected to benefit employment and GDP, mainly in the area of waste management. The clean industrial deal (CID) and the Critical Raw Materials Act stress the high strategic relevance and contribution of a circular economy in Europe for its industry and security agenda. Measures under these recent policies can be expected to trigger investments in the circular economy, create jobs and secure the EU’s access to (critical) raw materials. For example, the European remanufacturing sector is expected to create 500,000 new jobs by 2030.

In spite of the potential in this area, resource consumption s is expected to further increase in the future. Equally, there is a lot of uncertainty around the level of ambition and pace of change needed in implementing the recently-introduced circular economy policies. There is also a risk of rebound effects (for example, increased consumption due to resource efficiency gains), which would reduce their effectiveness. These policies' actual environmental and societal benefits are therefore uncertain.

Prospects of meeting policy targets 2030/2050

2030: No specific policy targets

2050: No specific policy targets

Robustness

The assessment of the environmental benefits of moving to doubling the CMUR is based on modelling scenarios and includes several uncertainties, including assumptions about feasible future recycling rates. The effects of circular economy measures — such as the lifetime extension of products through repair, remanufacture, reuse or new business models — have only been assessed based on the literature.

To date, countering effects such as possible rebounds have not been taken into account. The assessment of potential health and biodiversity impacts is limited; it only relates to the main air pollutants and land-use-based biodiversity loss. Data on employment and economic share in circular economy sectors currently only cover recycling and repair.

Charts/maps

Figure 1. Environmental impacts from resource use in the EU-27, 2010-2022